Published 4:00 am, Monday, October 23, 1995

A project to improve food production on the edge of the Taklimakan Desert in Xinjiang Province is pouring money into an area dominated by prison camps and People's Liberation Army forced labor camps, Wu said Monday.

Wu, 58, of Milpitas, is a scholar at the Hoover Institution at Stanford University. His latest report on China's laogai, or reform-through-labor prison system, comes just months after his arrest in western China caused a major tremor in U.S-Chinese relations.

He was expelled in August after a Chinese court convicted him of spying and sentenced him to 15 years in prison.

Wu said the World Bank's International Development Association has extended at least $90 million in credit to the Tarim Basin Project in the remote area populated by laogai camps run by the Ministry of Justice, and at least 14 smaller forced labor camps operated by the PLA.

The bank's 1991 staff appraisal report on the project does not mention the forced labor camps, but one of the project maps shows Pailou Farm, a laogai camp, Wu said.

"Maybe the Chinese were cheating them, maybe the World Bank never knew it. Whatever, we have to tell this," Wu said at a news conference.

Wu himself served 19 years in a western China forced labor camp. He eventually left for the United States and became an American citizen.

Jeff Fiedler, director of Wu's Laogai Research Foundation, said about one-fourth of the 600,000 people living in the project area are on the PLA-run farms. There are no exact figures on the prison population, but Fiedler estimated it is between 25,000 and 60,000.

World Bank spokesman Graham Barrett said Wu had not discussed the allegations with the bank, and he wouldn't comment until he could examine the report. He added, "The bank does not lend money in any way to fund this sort of thing. If there is any evidence, then we will take the appropriate action."

Wu urged the World Bank to appoint an independent commission to investigate the project and find out why China failed to provide full information to the bank about the project area. The bank should also adopt a policy barring the use of forced labor on all World Bank projects, he said.&lt;